Handling risk: What to do, how to prepare for the worst

WEST CHESTER, PA—Hotels have been in the news a lot over the past few years, and the coverage hasn’t been all that friendly. With the increase in reports of top-risk incidents at properties, hoteliers have been struggling with adapting and overcoming these challenges. Identifying these obstacles ahead of time and deploying proper training can put properties of any size ahead of those without any kind of plan.

“For the hospitality industry, the top three risks in recent years have been weather-related storm catastrophes, cybersecurity data breaches and active-shooter situations,” said John Welty, the practice leader for SuiteLife, an all-lines insurance and risk program for upscale hotels and resort properties administered by Venture Insurance Programs. “At the same time, slips, trips and falls, valet automobile and innkeeper liability claims continue to be the three most common claims reported regularly by the hotel industry.”

These top risks continue to evolve and change (each incident is different in its own way). “Just look to recent incidents like Hurricane Harvey, the massive Equifax data breach and the horrific massacre caused by an active shooter in Las Vegas,” Welty said. “Although there are some similarities in damages caused by each type of event, each claim situation has its own unique circumstances that continue to challenge hoteliers, insurance industry experts, law enforcement and more.”

“In today’s 60-second world, hoteliers are focused primarily on the bottom line; however, if we are providing consistent-quality products and services to our guests, a professional work environment for our employees, and are focused on mitigating or preventing risk, the bottom line will take care of itself.” —John Welty Venture Insurance Programs

That being said, there are ways for hotel properties to stay ahead of the curve to mitigate as many potential risks as possible. “For the top three risks I mentioned, being nimble and adaptive is key to being prepared and responsive,” Welty said. “Continued education, training and, most importantly, communication is essential moving forward. Some of the most complex risk to manage are those related to general liability or workers’ compensation involving guest or employee incidents.”

Insurers categorize exposures based on the severity of loss potential. “A cybersecurity data breach can cost significant income loss, governmental fines and damage to the insured’s reputation and goodwill,” he said. “A weather-related loss can place the insured out of business for months (if not up to a year).” Active-shooter situations can cause losses, too, most importantly, loss of life (as seen in the 2017 Mandalay Bay shooting incident).

Mitigating risks isn’t an easy task for properties, especially since they’re open 24/7, have employees working multiple shifts and are combating employee turnover. “As a result, hotels committed to risk management must require general managers or their risk managers to promote regular education, training and communication,” he said. “Protecting property is critical, too, but as a fixed asset, may be less complicated for a hotelier to manage. Other fixed assets could include automobile and valet claims.” These assets are easier to manage because they’re tangible, unlike risks revolving around guests, employees, etc.

Training and education plays a pivotal role when preparing for hurricane season. “Employees should be trained to do anything and everything from securing outdoor objects, to assisting guests with transportation and reservation changes, to preparing emergency supplies, like bottled water and ready-to-eat foods.” This type of training keeps employees ready and prepared for potential weather-related storm catastrophes.

Preventing cyber breaches at a hotel property requires an ample amount of training and education hours, too. “Proper training can help them recognize phishing attacks and other online scams,” Welty said.

“To prepare for the unthinkable—active-shooter incidents—employees can be trained to recognize and point out suspicious activity, such as out-of-the-ordinary comings or goings, unusual luggage or a do-not-disturb sign posted for more than 24 hours,” he added. Of course, these are all additional measures to take.

“One of the areas I see commonly overlooked is guest and employee safety, security and communication,” Welty said. “In today’s 60-second world, hoteliers are focused primarily on the bottom line; however, if we are providing consistent-quality products and services to our guests, a professional work environment for our employees, and are focused on mitigating or preventing risk, the bottom line will take care of itself.”

It’s important to note: Guest and employee safety isn’t something intentionally being overlooked by operators, he said. “The truth is if a regular quarterly education and training session is not on the schedule, it will be put on the back burner,” Welty said. “Employee time is valuable, and it can be difficult to pull employees away from their normal job responsibilities to attend training, but it must be done.”

Hoteliers can develop a detailed plan to manage specific risks by working with a specialty insurer who can assess and identify a property’s risk exposures. “Employees can be part of the plan, regularly trained to inspect the premises for certain risk exposures and unusual activities, and be required to take immediate action to help mitigate that risk, whether it’s cleaning up a spill or reporting [something]suspicious,” he said.

These plans aren’t set in stone, however; they’re living, breathing documents. “For example, experiencing a Category Four hurricane is much different than a Category One,” Welty said. “Each incident presents an opportunity to improve upon the plan that’s already been set in place.”

Properties offering ancillary services have additional risks. Hoteliers can work with insurance carriers and brokers to manage and mitigate these extra areas of concern.

“When offering a new ancillary service, hoteliers often fail to consider whether the service makes sense from a liability viewpoint,” he said. “Too often, a hotelier wants to be the first in on a service from a guest satisfaction standpoint. ‘First In’ or ‘We Do That Too’ may need to take a back seat to consider exposure and liability. ‘What is my exposure and liability?’ should be one of their first questions.”

The insurance industry is expected to evolve with the hospitality industry. “Innovation, technology, social media, understanding the Internet of Things and more has and will continue to change the hospitality industry,” Welty said. “We’ve seen this already with the wide variety of boutiques, niche hotels and hotel brands like Hilton or Marriott opening new doors within the market over the last 36 months.”

To adapt, insurance companies will continue to offer hospitality customers a broad range of products, services and solutions.

“Change is constant, so the insurance landscape for hotel properties will change in the coming years,” he said. “Though there may be some bumps in the road, ultimately, hoteliers will find the coverage and expertise they need from a qualified insurer.” HB